New Greek Bailout Deal May Not Solve Anything

If you think you have Greece fatigue, imagine how the financial kingpins of Europe feel after 13 hours of talks to approve a new bailout deal for the trouble nation — one that isn't likely to end the hand-wringing anytime soon.

If you think you have Greece fatigue, imagine how the financial kingpins of Europe feel after 13 hours of talks to approve a new bailout deal for the troubled nation — one that isn't likely to end the hand-wringing anytime soon.

Assuming that Greece's bondholders agree to the plan and the parliaments of Germany, France, and the Netherlands approve it, there's still no guarantee that these measures will make any difference to the Greeks. The only way their government was able to secure the bailout was by approving a massive austerity plan that they may never be able to implement, as the very idea of such harsh cuts led to riots and arson across Athens. Even if the plan did work, those austerity measures are already hurting Greece's fragile economy, raising their debt even further, and making the GDP targets impossible to reach. A memo distributed to key European officials and unveiled by Financial Times spells it out plainly:

It warned that two of the new bail-out’s main principles might be self-defeating. Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its €200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.

As Business Insider points out, the plan to reduce Greece's debt makes some pretty generous assumptions about the future growth of their economy; assumptions that even European leaders are forced to admit are unlikely to come true. Greece has been through this before (harsh cuts and more bailouts) and none of it has helped. Even if by some miracle they did pan out — old investors take their losses, new investors move in anyway, business booms, the Greek government becomes a lean machine, and the eurozone turns itself around — that won't fix the fundamental flaws in the Greek economy and entire European Union experiment where 17 governments try to pretend they are living under one financial roof.

And if they don't pan out ... well, it won't take much to drive the whole continent off a cliff. A lot can happen between now and 2020, and every small set back makes the end goal that much tougher to reach. You have definitely not heard the last of this Greek crisis.

This article is from the archive of our partner The Wire.

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